"We need to incentivise and encourage private sector participation in affordable housing for urban poor, as the housing sector cannot grow without infrastructure development and access to low-cost funds," HUDCO chairman V.P. Baligar said at a day-long 'South India Real Estate Conference', organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) here.

In view of high cost of capital and credit risk and rising inventories (unsold flats), Baligar said financing options should be made available for affordable housing providers, individuals and community borrowers.

"The private sector should be allowed external commercial borrowings for affordable housing projects due to financing challenges faced by stakeholders due to non-availability of cheaper and long-tenor finance," Baligar said.

Noting that southern states (Andhra Pradesh, Karnataka, Kerala, Puducherry and Tamil Nadu) have grown phenomenally on the real estate map, FICCI director-general Arbind Prasad said demand for affordable housing across the country would zoom to a whopping 38 million in the next 17 years, creating employment opportunities to around 17 million over the next decade.

"Though urbanisation level in south India at 41 percent was greater than rest of the country, lop-sided development of real estate is widening the demand-supply gap with 95 percent shortage for economically weaker sections and low-income group segments," he lamented.

Karnataka Chief Secretary S.V. Ranganath said the real challenge was in offering housing opportunities for low and economically weaker section groups considering roadblocks faced by developers and builders - from capital to permissions - the cost of which is passed on to them.

"Small changes in procedure and processes might bring down the cost. As urban land is expensive and scarce, how will a private developer and builder incentivise. Since policies keep changing, we need urgent steps to reduce regulatory risks, micro-economic risks and benchmarking according to international standards," Ranganath said, releasing a white paper on 'Building New Dimensions for Real Estate Growth' brought out by Ficci and global consultant Ernst & Young.

--

Get stories like this on the Yahoo app and discover more every day.Download it now.